Home Builder UCP’s IPO Prices at Low End of Expected Range

West Coast developer UCP Inc.’s initial public offering priced at the low end of its expected range Thursday evening, the latest sign investors are turning more cautious on home builders’ shares.

The San Jose-based company, with holdings in Washington state and California’s Central Valley, is selling 7.8 million shares for $15 each, according to people familiar with the offering, raising nearly $116.3 million, before the potential
sale of additional shares to underwriters. The company had expected the shares to fetch $15 to $17 each, according to a regulatory filing.

UCP’s debut adds to what has already been a record year for home builder IPOs, but comes as such shares have lost some of their luster. Skeptics argue home builders are overvalued after share-price gains in recent years, and that a
continued increase in interest rates could make it harder for home buyers to get financing, slowing the housing recovery.

Prior to UCP’s offering, this year’s three IPOs by U.S.-listed home builders had raised $1.24 billion, far exceeding the previous record of $198 million raised by five IPOs in 1993, according to Dealogic data going back to 1993.

Home builder stocks have pared recent gains of late. The DJ U.S. Home Construction Index is down 5.2% the past month after notching a nearly six-year high in May.

It has been tough sledding for some recent builder IPOs. Scottsdale, Ariz.-based Taylor Morrison Home Corp. is up 14% from its April debut. But Southern California builders William Lyon Homes Inc. and Tri Pointe Homes LLC are trading below the offer prices for their IPOs in May and January, respectively.

UCP is slated to start trading on the New York Stock Exchange Thursday under the symbol “UCP.” Citigroup Inc. led the deal with Deutsche Bank AG and Zelman Partners LLC.